Monday, March 31, 2014

The World Cup Will Not Have A Large Impact On Brasil

March 31, 2014 12:05 am

World Cup will have little impact on Brazil, says Moody’s

The official mascot of the 2014 World Cup in Brazil©Getty
The official mascot of the 2014 World Cup in Brazil
Spending on the World Cup will have a negligible impact on Brazil’s economy despite Brazilians’ perceptions that the tournament is costing the country dearly, a study says.
The games will generate only 0.4 per cent of additional gross domestic product for Brazilin a 10-year period and the infrastructure spending envisaged amounts to just 0.7 per cent of the country’s total investment planned between 2010 and 2014, Moody’s, the rating agency, said in a report.
“The Brazilian economy is very large so, because the duration of the World Cup is limited and also the investment is limited to certain cities and or states, the impact is not that large,” said Barbara Mattos, an analyst with the agency.





The government has made extravagant promises of giant economic gains from hosting the Fifa World Cup, such as the generation of 3.6m jobs, in an attempt to sell the benefits of the event to an increasingly sceptical public.
But discontent in Brazil over the quality of public transport, health, education and security boiled over last year during the Confederations Cup, which served as a dress rehearsal for this year’s tournament, in the form of mass protests.
“The World Cup is very expensive and Brazil should have other priorities – just look at this bus here, every day it’s completely crammed. I don’t think this is the right time for Brazil to host the world,” said Luiz Henrique, a conductor on a bus in São Paulo.
“It will be great to follow the games, it will be historical, I’ll be thrilled to watch the games with my children, drinking an ice-cold Coca-Cola, but it enrages me to see how much they are spending on it.”
The Moody’s report, however, could serve as a reminder to all governments and voters in large economies to lower their expectations regarding the effects of hosting large sporting events.
Brazil’s minister of sport Aldo Rebelo last year rattled off a list of expected benefits from the World Cup including R$28bn ($12bn) investment in urban transport, ports, airports, stadiums and tourism infrastructure.
Citing an Ernst & Young study, Mr Rebelo said there would be R$112bn in additional economic activity between 2010 and 2014 related to the World Cup.
But he admitted that many of the public infrastructure projects, other than the stadiums, such as airport upgrades, were already included in the government’s general infrastructure plan, known as the growth acceleration programme.
Moody’s said the World Cup would not affect Brazil’s sovereign credit rating or that of most of its companies.
Even at the individual city and state level, government outlays on the event, seen as lavish by protesters, would not represent a strain on public finances.
Even the state most heavily exposed to the event, the soyabean centre of Mato Grosso, whose capital Cuiabá is building a stadium and a light rail system, will only increase debt-to-total revenues nearly 9 percentage points to about 51 per cent, a level that Moody’s considers comfortable for its credit rating.
But the reputational effects of the tournament, which was witnessed by half the world’s population in South Africa four years ago, could be longer reaching.
Moody’s said a successful World Cup would raise Brazil’s stature on the world stage but “social unrest during the games or failure to have needed infrastructure in place could sully the country’s image”.
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